Now the May Mayhem is almost over, time to consider the survivors....
For the June 2015 “>20%” monthly oil stock competitions, which oil stocks will have the greatest move for
(i) >20% gain?
(ii) >20% loss?
You may enter two stocks, one for (i) and one for (ii). More than one person may enter the same stock. The deadline for the June competition is midnight this Sunday. Results will be posted on this thread asap after the June month end.
Good luck!!!!
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In the old days of 2014 and before, this monthly guessing game used to be mostly about geology ....which of the upcoming wells would succeed and which would fail?
Very different today, I'd suggest. Now it is all about corporate actions, financing and other matters taking place behind closed doors. That makes it intrinsically difficult to guess outcomes.
I might as well go for SOCO International (LON:SIA) for the +20%, being bereft of other insights for public consumption. A few reasons:
- Now trading ex the 10p dividend
- AGM on 10th June, to be accompanied by a corporate update
- Substantial director buying between 142p and 180p in March, following the results and share price plummet. That suggests to me that they think the shares will recover to levels higher than the current 181p. I note that this buying stopped at the end of March - which perhaps implies a new close period (not that unusual, to be honest, in the industry).
- At some point the proposals for the new FDP on TGT will emerge into the public domain. I don't think that is particularly likely to happen in June - but I wouldn't rule out some indications of the likely scope of the FDP. In particular, if drilling plans for 2016 can be indicated (even as a range) then that may point to a potential writing back of a chunk of the "lost" reserves at year end (because the FDP will be agreed by then).
- Volumes seem to have risen recently and there seems to me to be some underlying buying interest.
- Sentiment seems to be completely shot. Not without reason, given the shock of a poorly-signalled (IMO) reserves cut in March coming on top of unprecedentedly-persistent negative views on the sector (I exaggerate slightly there - but it is certainly worse than it has been for a number of years).....but, nevertheless, certainly plenty of retail punters piled out of the shares in March and more shares found their way into the directors' hands. If sentiment should improve, there won't be a ready supply of sellers (apart from a handful ...well, one, anyway that I can recall... of prescient people who baled out of E&Ps last year.and bought back in March alongside the directors).
- Analysts seem equally negative for the most part - but seem to be making the same error that they made last year (projecting the recent past into the future, without much regard for the chance of major events changing the picture....in this case, the FDP for TGT).
- Costs for exploration and development (rigs, seismic, other services) have been coming down rapidly. It is a matter of judgement how long to wait before locking into these lower costs, especially for companies that have the finance for development of assets that are economic to develop at current oil prices. That must particularly apply to the TGT field, I think.
- Asset buyers know that they can't sit on the sidelines too long, otherwise there is a danger that an upswing in the oil price will scupper deals before they complete. Royal Dutch Shell (LON:RDSA) for example moved particularly quickly to do a deal with BG (LON:BG.) but you may have noticed that they don't expect to actually complete the deal until early 2016. Smaller deals (as would be the case if someone wanted to buy £SIA) will complete more quickly - but it would still likely not be much before year-end; SOCO International (LON:SIA) 's shareholder structure offers some certainty here (relative to others) but time is still a factor. Is someone more likely to move in June than in September (bearing in mind the logistical difficulties of doing deals in July/August)? I don't know - but I wouldn't rule it out.
In sum, it may be too optimistic to expect much to happen for SOCO International (LON:SIA) in June. Perhaps it is too early in several respects? But a 20%+ rise towards the bottom end of the 2014 range may not be out of the question, if they look like they are moving in the right direction on the TGT FDP.
But what do I know? Very little to judge by the recent past.
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